Xtant Medical Holdings, Inc. Q2 FY2026 earnings call

• Commercial Expansion and Integration: Extant Medical closed an exclusive U.S. distribution agreement for Dillon Technologies' Hemoblast product (high-performance surgical hemostasis) in mid-April 2026, adding complementary hemostatic technology to the company's portfolio and opening access to a $1 billion global addressable market. The company hired Dillon's 17 U.S. sales reps and 2 regional managers, who are being integrated into Extant's commercial organization and trained on Extant's full product line. This integration, alongside internal investments to double the company's regional sales force and expand marketing and national accounts teams, consumed significant management and operational time in Q2, contributing to softer than expected quarterly sales. There is limited overlap in call points between the new Hemoblast-focused sales team and Extant's legacy sales force, creating significant cross-selling opportunities.\n- New Product Launch: Trivium Shaped, a pre-shaped extension of Extant's Trivium bone graft portfolio, launched in May 2026 and has generated strong early sales traction. The pre-shaped ready-to-use format reduces surgeon preparation time and improves placement consistency, which has driven positive early feedback and sales momentum. Trivium Shaped joins Collagen X and OsteoFactor Pro as recent launches supporting core biologics growth.\n- Portfolio and Market Expansion: The expanded product portfolio (including bone grafts, demineralized bone matrix, amnio products, collagen products, and now hemostatic biologics) positions Extant to enter adjacent high-value regenerative medicine markets, including chronic wound care and surgical repair, with a combined total addressable market (TAM) of $6.5 billion. The addition of Hemoblast adds $1 billion in incremental TAM, making Extant a broad one-stop partner for surgeon and hospital needs. In-house manufacturing and quality control differentiate Extant from most competitors in the space.

Total Q2 2026 revenue was $23 million, down from $35.4 million in Q2 2025 and $24.8 million pro forma Q2 2025 (excluding divested non-core assets and discontinued licensed revenue). Biologics revenue underperformed relative to initial guidance: older core orthobiologic lines (Osteo Select, Osteo Sponge) and the amnio product line (tied to the weak advanced wound care market) both saw larger declines than expected. The Hemoblast hemostatic product contributed $1.5 million in Q2 2026 revenue (recognized primarily on a net basis, $600,000-$700,000 lower than originally expected due to transition delays). Hardware revenue (led by the Cortera spinal fixation system) came in higher than anticipated, partially offsetting biologics headwinds. Gross margin was 57.9% in Q2 2026, down from 68.6% in Q2 2025, primarily due to the cessation of high-margin Q-code amnio license revenue, reduced production efficiencies, and higher excess/obsolete inventory charges. Operating expenses were $22.5 million, up from $19.7 million in Q2 2025, driven by a $5 million exclusivity fee for the Dillon distribution agreement, partially offset by lower G&A and sales/marketing costs from the 2025 Companion Spine divestiture. R&D expenses were $695,000, up from $566,000 in Q2 2025. Net loss was $9.4 million ($0.07 per share), compared to net income of $3.6 million in Q2 2025. Adjusted EBITDA was a loss of $2.7 million, compared to positive $6.9 million adjusted EBITDA in Q2 2025. As of June 30 2026, the company held $9.9 million in cash and cash equivalents, with $23 million in total indebtedness and $0.7 million in revolving credit availability.

• Full year 2026 revenue guidance was modestly lowered to a range of $99 million to $103 million, down from the prior guidance range of $101 million to $105 million. The downward revision reflects lower than expected Q2 biologics revenue and ongoing persistent headwinds for the amnio product line tied to the weak advanced wound care market that are expected to continue through the second half of 2026.\n- Management expects accelerating sequential biologics growth in the second half of 2026, as the newly integrated Dillon sales team completes training, fully deploys across all Extant product lines, and realizes expected sales synergies.\n- Going forward, nearly all Hemoblast sales will be processed through Extant's customer agreements and distribution network, recognized on a gross basis that will increase reported revenue relative to Q2 2026's net-basis recognition.

• Forward-looking performance is not guaranteed, and actual results may differ materially from current expectations due to inherent risks and uncertainties, which are detailed in the company's SEC filings including the Form 10-K.\n- The company has limited cash and credit availability as of Q2 2026: just $9.9 million in cash and $0.7 million in available revolving credit, down from $17.3 million in cash and $3.8 million in availability at the end of 2025.\n- Sales momentum in Q2 was negatively impacted by the time and resources required to integrate and train the new Dillon sales team, and full deployment of the expanded sales force will take additional time.\n- Persistent weakness in the advanced wound care market has created larger than expected headwinds for the company's amnio product line, which are expected to continue through the end of 2026. Older core orthobiologic product lines have also declined more than management originally expected.\n- Transitioning large hospital system Hemoblast customer contracts from Dillon to Extant is an ongoing, slow process that has delayed full revenue recognition in Q2.

Q: What specific areas of the orthobiologics segment underperformed relative to initial annual guidance? / A: Management identified two key underperforming areas. First, older core product lines including Osteo Select and Osteo Sponge, the longstanding workhorses of Extant's portfolio, have declined more than originally expected. Second, the amnio product line, already expected to face headwinds tied to the weak advanced wound care market, saw greater softness than anticipated, with no early signs of the expected recovery that management previously forecast.

Q: What cross-selling opportunities come with the addition of the Hemoblast sales team, and what Hemoblast revenue does guidance assume this year? / A: The Hemoblast team already serves hospital areas outside Extant's traditional orthobiologics focus, and can carry Extant's Collagen X and amnio products into these new spaces. They also add coverage for smaller accounts that Extant previously only served through an under-touched independent agent network, and have strong existing hospital materials management relationships that help position Extant as a broad one-stop biologics provider. Full revenue assumptions will not be finalized until more customer contracts transition from Dillon to Extant, a slow process for large health systems.

Q: When did the new Dillon sales reps begin promoting products after training, and do they have access to Extant's full existing product portfolio? / A: The deal closed in mid-April at the start of Q2. The first few weeks were spent on HR and payroll integration, and the team spent most of Q2 getting trained on just two initial products: Collagen X and amnio. Full access to all Extant orthobiologic products was rolled out after the end of Q2, and the team is currently getting up to speed on the full portfolio, while also taking on coverage of underserved independent agent accounts. The training process pulled legacy team time away from existing sales in Q2, but the expanded commercial footprint will drive growth in the second half.